MAGELLAN INTERN. CORP. v. SALZGITTER HANDEL GMBH

The opinion of the court was delivered by: Shadur, Senior District Judge.

MEMORANDUM OPINION AND ORDER

Salzgitter Handel GmbH ("Salzgitter") has filed a motion
pursuant to Fed. R.Civ.P. ("Rule") 12(b)(6) ("Motion"), seeking
to dismiss this action brought against it by Magellan
International Corporation ("Magellan"). Because the allegations
in Complaint Counts I and II state claims that are sufficient
under Rule 8(a), Salzgitter's Motion must be and is denied as to
those claims. Count III, however, is deficient and is therefore
dismissed without prejudice.

Facts

In considering a Rule 12(b)(6) motion to dismiss for failure to
state a claim, this Court accepts all of Magellan's well-pleaded
factual allegations as true, as well as drawing all reasonable
inferences from those facts in Magellan's favor (Travel All Over
the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1429
(7th Cir. 1996)). What follows is the version of events set out
in the Complaint, when read in that light.

Offers, Counteroffers and Acceptance

Magellan is an Illinois-based distributor of steel products.
Salzgitter is a steel trader that is headquartered in Dusseldorf,
Germany and maintains an Illinois sales office. In January
1999*fn1 Magellan's Robert Arthur ("Arthur") and Salzgitter's
Thomas Riess ("Riess") commenced negotiations on a potential deal
under which Salzgitter would begin to act as middleman in
Magellan's purchase of steel bars — manufactured according to
Magellan's specifications — from a Ukrainian steel mill,
Dneprospetsstal of Ukraine ("DSS").

By letter dated January 28, Magellan provided Salzgitter with
written specifications for 5,585 metric tons of steel bars, with
proposed pricing, and with an agreement to issue a letter of
credit ("LC") to Salzgitter as Magellan's method of payment.
Salzgitter responded two weeks later (on February 12 and 13) by
proposing prices $5 to $20 per ton higher than those Magellan had
specified.

On February 19 Salzgitter sent its pro forma order
confirmations to Magellan. But the general terms and conditions
that were attached to those confirmations differed in some
respects from those that had been attached to Magellan's purchase
orders, mainly with respect to vessel loading conditions, dispute
resolution and choice of law.

Contemplating an ongoing business relationship, Magellan and
Salzgitter continued to negotiate in an effort to resolve the
remaining conflicts between their respective forms. While those
fine-tuning negotiations were under way, Salzgitter began to
press Magellan to open its LC for the transaction in Salzgitter's
favor. On March 4 Magellan sent Salzgitter a draft LC for
review.*fn3 Salzgitter wrote back on March 8 proposing minor
amendments to the LC and stating that "all other terms are
acceptable." Although Magellan preferred to wait until all of the
minor details (the remaining conflicting terms) were ironed out
before issuing the LC, Salzgitter continued to press for its
immediate issuance.

On March 22 Salzgitter sent amended order confirmations to
Magellan. Riess visited Arthur four days later on March 26 and
threatened to cancel the steel orders if Magellan did not open
the LC in Salzgitter's favor that day. They then came to
agreement as to the remaining contractual issues.*fn4
Accordingly, relying on Riess's assurances that all remaining
details of the deal were settled, Arthur had the $1.2 million LC
issued later that same day.

Post-Acceptance Events

Three days later (on March 29) Arthur and Riess engaged in an
extended game of "fax tag" initiated by the latter. Essentially
Salzgitter demanded that the LC be amended to permit the
unconditional substitution of FCRs for bills of lading — even for
partial orders — and Magellan refused to amend the LC, also
pointing out the need to conform Salzgitter's March 22 amended
order confirmations to the terms of the parties' ultimate March
26 agreement. At the same time, Magellan requested minor
modifications in some of the steel specifications. Salzgitter
replied that it was too late to modify the specifications: DSS
had already manufactured 60% of the order, and the rest was under
production.

Perhaps unsurprisingly in light of what has been recited up to
now, on the very next day (March 30) Magellan's and Salzgitter's
friendly fine-tuning went flat. Salzgitter screeched an ultimatum
to Magellan: Amend the LC by noon the following day or Salzgitter
would "no longer feel obligated" to perform and would "sell the
material elsewhere." On April 1 Magellan requested that the LC be
canceled because of what it considered to be Saltzgitter's
breach. Salzgitter returned the LC and has since been attempting
to sell the manufactured steel to Magellan's customers in the
United States.

Magellan's Claims

Complaint Count I posits that — pursuant to the Convention — a
valid contract existed between Magellan and Salzgitter before
Salzgitter's March 30 ultimatum. Hence that attempted ukase is
said to have amounted to an anticipatory repudiation of that
contract, entitling Magellan to relief for its breach.

Finally, Count III asserts that specifications given to
Salzgitter for transmittal to DSS constitute "trade secrets"
pursuant to the Illinois Trade Secrets Act ("Secrets Act," which
defines the term "trade secret" at 765 ILCS 1065/2(d)).
Salzgitter is charged with misappropriation of those trade
secrets in attempting to sell the manufactured steel embodying
those secrets to Magellan's customers (Complaint ¶¶ 9, 45-47).
Magellan relatedly claims that the threat of future disclosure
and use of those asserted trade secrets by Salzgitter causes
Magellan irreparable harm (Complaint ¶ 49).

Documentary Grist for the Motion Mill

As an initial matter, Magellan's Response to Defendant's
12(b)(6) Motion To Dismiss ("Response") includes a request that
Salzgitter's Rule 12(b)(6) pleading motion be converted to one
for summary judgment under Rule 56, with Magellan thus having the
right to obtain further evidence under Rule 56(f) to support the
Response.*fn6 It is of course true that such an option is made
available to a court under Rule 12(b) where "matters outside the
pleading are presented to and not excluded by the court." But
that alternative seldom makes sense at the threshold stage of any
litigation (see, e.g., Rodi v. Society Nat'l Bank, No. 97 C
8441, 1998 WL 61200, at *1 (N.D.Ill. Feb. 9, 1998) — and even
then it is ordinarily considered at the instance of a moving
defendant, not a responding plaintiff).*fn7 Just so, Magellan's
invitation is declined here.

Indeed, even apart from that last-mentioned consideration, the
quoted Rule 12(b) language does not come into play in this case
because the Salzgitter exhibits are not really "matters outside
the pleading." That is so because the Complaint refers expressly
or implicitly to all of the exhibits added to the Salzgitter
Motion. Hence those exhibits can properly be considered as part
of the pleadings (see, e.g., Venture Assocs. Corp. v. Zenith
Data Sys. Corp., 98 ...

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